Prepared remarks
Hello, everyone, and good evening. I'm Shirish Jajodia, Corporate Treasurer and Head of Investor Relations at Strategy. I will be your moderator for Strategy's 2025 Third Quarter Earnings Webinar. We will start with the call with a 60-minute presentation, starting first with Andrew Kang, followed by Phong Le, and then Michael Saylor. This will be followed by a 30-minute interactive Q&A session with four Wall Street equity analysts and four Bitcoin analysts. Before we proceed, I will read the safe harbor statement. Some of the information we provide in this presentation regarding our future expectations, plans, guidance, and prospects may constitute forward-looking statements, including, without limitation, our guidance with respect to earnings and our KPIs contained in this presentation. Actual results may differ materially from these forward-looking statements due to various important factors, including fluctuations in the price of Bitcoin and the risk factors discussed in our most recent quarterly report on Form 10-Q filed with the SEC on August 5, 2025, and our current report on Form 8-K filed with the SEC on October 6, 2025. We assume no obligation to update these forward-looking statements, which speak only as of today. With that, I will turn the call over to Andrew Kang, the CFO of Strategy.
Thank you, Shirish. And I'll start with some highlights for the quarter. We now hold 640,808 Bitcoin or over 3% of all Bitcoin ever to exist. This reinforces the scale and the dominance of our corporate Bitcoin treasury company. We have a market cap of $83 billion, which positions us among the top publicly listed companies in the U.S. We have four listed preferred securities in the market, STRF, STRK, STRD, and STRC, with STRCs or Stretch being the largest U.S. IPO of 2025 so far, all of which continue to grow in liquidity and investor interest each day. We've also raised $19.8 billion in capital year-to-date to acquire more Bitcoin. Our capital markets platform continues to deepen in liquidity and investor interest, and we continue to show positive performance in our Bitcoin metrics, all central to generating long-term shareholder value. Moving on to EPS results, turning to our Q3 2025 GAAP financial results, we reported $3.9 billion in operating income, $2.8 billion in net income, and earnings of $8.43 per share.
That's a transformative improvement year-over-year, reflecting a strong performance in Bitcoin, the fair value treatment we now have on our Bitcoin and disciplined capital-raising activities. This marks our second consecutive quarter of significant positive GAAP earnings and over $8 billion in positive earnings in the last four quarters. Next slide. Our results for the first nine months of the year showed $12 billion in GAAP operating income, $8.6 billion in net income, and earnings of $27.80 per share, continuing our record-breaking year of performance. Moving on to Bitcoin per share, Bitcoin per share, as we introduced last quarter, measures the accretion of Bitcoin on a per-share basis by calculating the ratio between the company's Bitcoin holdings and assumed diluted shares outstanding, represented here in Satoshis. Through October 26, our Bitcoin per share was $41,370 compared to Bitcoin per share of $39,716 as of July 31.
We are consistently accumulating more Bitcoin per share each quarter, the highest of any Bitcoin treasury company, creating direct and measurable value for our shareholders. Next slide. Since adopting our Bitcoin strategy in 2020, we've consistently increased Bitcoin per share. We began with 56,598 Bitcoin per share in 2020, and as of October 2025, that has grown to 200,197 Bitcoin per share, more than a 3.5x increase over that period. We've also grown BTC yield year after year through disciplined capital raises and immediate conversion into Bitcoin on our balance sheet, reflecting a 26% BTC yield year-to-date. This sustained growth reinforces our ability to deliver Bitcoin yield to our shareholders through market cycles by continuously executing on our capital markets and acquisition strategy. Next slide. Here, we highlight our year-to-date Bitcoin performance metrics versus our full-year 2025 targets.
Year-to-date, we've achieved a 26% BTC yield compared to our revised full-year target of 30%. Our year-to-date BTC gain is 116,555 BTC, up from 88,000 at the end of Q2, reflecting disciplined capital deployment and the strengthening of our Bitcoin balance sheet. Our BTC gain performance translates into approximately $12.9 billion in BTC dollar gain year-to-date compared to our $20 billion full-year goal. Next slide. We now hold 640,808 Bitcoin or $71 billion, purchased at a total cost of $47 billion or an average of $74,000 per Bitcoin. We hold approximately 3.1% of all Bitcoin that will ever exist. As in the past, 100% of our Bitcoin remains fully unencumbered. This next slide highlights the transformation of our balance sheet over the past year and the continued strength we've seen through the third quarter. Year-over-year, digital assets grew from just under $7 billion in Q3 of 2024 to just over $73 billion in Q3 of 2025, driven by both additional Bitcoin acquisitions and the adoption of fair value accounting at the beginning of the year.
The accounting change alone added approximately $18 billion to our digital assets and $12.7 billion to total equity at the time of adoption. Quarter-over-quarter, digital assets have continued to climb from $64.4 billion in Q2 to $73.2 billion in Q3, alongside the steady growth in total equity on our balance sheet, reaching now $58.1 billion at the end of Q3. Overall, fair value accounting has made our balance sheet more transparent for our investors, while execution in introducing innovative digital credit through our preferred equity IPOs this year has continued to expand shareholder equity and reinforce the company's position as the leading Bitcoin treasury company. Next slide. In Q3, we recognized an increase in our Bitcoin holdings from $64.4 billion at the end of Q2 to $73.2 billion at the end of Q3. This increase was made up of $3.9 billion of fair value gain in our Bitcoin holdings due to the change in Bitcoin price between the first and last day of the quarter and also through the addition of $5 billion of new Bitcoin added to our balance sheet in Q3.
Next slide. As of October 24, our enterprise value was $98 billion with a market cap of $83 billion, supported by a Bitcoin net asset value of $71 billion or 72% of total enterprise value. Our $8.2 billion of convertible debt is equal to just 11.6% of our total Bitcoin NAV, and the $6.6 billion of preferreds represent just 9.3% of our Bitcoin holdings. Our annual dividend and interest obligations totaled $689 million, which is less than 1% of our total Bitcoin, reflecting the efficiency and sustainability of our balance sheet. Our capital structure is built to endure volatility, provide stability, scalability, and long-term shareholder confidence. Next slide. We continue to have $8.2 billion in total notional debt across our converts with all but two that remain in the money with a total weighted average maturity of 4.4 years. The total current notional value of our outstanding preferred equity as of October 24 stands at approximately $6.7 billion, up from $6.3 billion as of July 29.
Next slide. Our total annual interest and dividend obligations are $689 million, consisting of $35 million in interest expense on our converts, which is about 42 basis points average cost. We have $522 million in dividend obligations from our cumulative preferreds, STRF, STRC, and STRK, and an additional $125 million related to our noncumulative preferred STRD. Here, we show more than sufficient access to liquidity to manage our total annual interest and dividend obligations through our proven track record of capital raising activities. Our total annual obligations represent only about 1.7% of total capital raised in the last 12 months and only about 2.6% of total common equity raised in the last 12 months. As a measure of our strong financial performance, our fixed obligations represent only 6.1% of year-to-date GAAP operating income. Next slide. Finally, we are extremely pleased with the IRS interim guidance issued on September 30, which now excludes unrealized gains from our Bitcoin holdings from adjusted financial statement income for purposes of CAMT.
Not only does this important clarification directly benefit Strategy, but it also paves the way for other corporations to hold and grow Bitcoin on their balance sheets. We are grateful and appreciative for the support of the Treasury, IRS, Congress, and the administration for aligning on the importance of clarifying the specific rule under CAMT and lifting what otherwise would have been an extremely burdensome rule that would have targeted digital assets and for continuing to support the growth and innovation of the digital asset economy. I'll now turn the call over to Phong Le, Strategy's President and CEO. Thank you.
Thank you, Andrew. I will go through an update on our capital markets activity, and then I will review the guidance that we provided for 2025. So, first, I want to welcome and invite everybody to join us in four months in Las Vegas at the beautiful Wynn resort for Strategy World 2026 and our fifth annual Bitcoin for Corporations. So, hopefully, those who are listening or watching this presentation and have been fans of Strategy Software or Strategy and our Bitcoin strategy can come out and join us. So, next slide, Shirish. Taking a step back, we used to compare ourselves to other companies that have Bitcoin on their balance sheet. As you know, with over 640,000 Bitcoin and nearly over 3.1% of all the Bitcoin ever created, we found it best to compare ourselves to the largest corporate treasuries in the world. You'll see here with $71 billion of Bitcoin on our balance sheet, we're fifth when comparing cash and short-term investments and excluding financial services companies.
Our aspiration in the next year is to be #2 and, in the next 5 to 10 years, to be #1. So how do we do that? Next slide. What we've done in the past two years is raised a significant amount of equity and capital through capital markets. In 2024, we raised $22.6 million, of which about 27% or $6.2 million was from the convertible debt market. Year-to-date this year, we've raised $19.8 billion. The way we've raised it has changed significantly. We've reduced our convertible debt raises to about 10% and increased our raises through preferreds to $6 billion or about 30%. Since the end of January of 2025, we've launched our preferred strategy, and it's been very successful so far year-to-date. As we start to reduce our reliance on convertible notes, our plan is to allow those to equitize over time. Based on the earliest potential equitization dates, you'll see here that by 2029, we will have no more convertible debt on our balance sheet.
Instead, we will season the preferred market through the course of this year via four IPOs; as Andrew mentioned, the largest IPO coming three months ago with STRC or Stretch, we've raised $6.7 billion through the preferred market. Interestingly, as you look at this, the largest portion of that raise has come from the retail market. The initial offering of Strike had about 4% access or raises through retail, and the latest offering Stretch had about 23% through retail. Next slide, Shirish. So how do we seize the market and grow our preferred offerings? Three real techniques that you'll see us continue to use. First is distribution. Recently, in the last month, we've seen more brokerages list our preferreds. Robinhood listed each of our four preferreds in the last month, and we've seen significant volume and liquidity through Robinhood. They listed those as the first-ever preferreds on the platform because of demand from other users.
We're also going to continue to distribute through wealth management, broker-dealers, RIAs; Morgan Stanley participated in our latest preferred offering, which gave us significant access to their wealth management channel and retail customers. We will start to work with different banks and financial institutions to explore other types of products, potentially ETF wrappers and structured finance products that have our preferreds underlying them. We're doing more and more in terms of field marketing, attending industry conferences, and leveraging finance events where we seek access to customers and buyers interested in credit and debt products. We're also doing more teach-ins, just feet on the street meeting with financial advisers, brokers, RIAs, and family offices. Last, you'll see more digital marketing. You're already seeing us provide some information and advertise some of our preferreds, namely Stretch, on social media.
We plan to have even greater presence on YouTube, traditional media platforms like Wall Street Journal and Bloomberg, as well as our strategy.com website and our strategy app, which, if you have not downloaded yet, I suggest you do so, along with more interviews and podcasts. So, these are three different ways we will continue to create distribution and awareness of our credit instruments. The other area of distribution is international expansion, right? Currently, our products are listed on NASDAQ as U.S.-based products, U.S. dollar-based products. But there’s significant access to capital if we were to launch a Canadian product on a Canadian exchange in Canadian dollars, launch a European product on a European exchange, or possibly in areas of the world like Asia or Latin America. We believe that by accessing these markets and providing new products similar to our preferred products like Stretch or Strife, we can access greater capital pools to fund more Bitcoin acquisition that is accretive to our shareholders.
We announced this week that we have the first-ever published rating of a Bitcoin treasury company by a major credit agency. S&P has assigned us a B- issuer credit rating to Strategy. We think this is a big milestone not just for Strategy but for Bitcoin treasury companies and Bitcoin as an asset class. There has been a lot of discussion around whether we think this is a good rating or not; I think it's a solid starting rating, and more importantly, to have a rating gives us access to more pools of capital. So what does a B- rating mean? By definition, it means that there's a stable outlook, and it reflects the expectation that we'll continue to manage our capital structure prudently and retain market access. We are rated under a framework called nonbank financial institutions— that’s how S&P rates us. At this point, Bitcoin is not viewed as a capital asset; it’s deducted from our equity, driving negative risk-adjusted capital.
So what needs to change for the rating to improve? One, it’s appropriate that Bitcoin be treated differently and as a capital asset at full credit, which would require the risk-adjusted capital or the Basel frameworks to change or for S&P to change how they view capital at Bitcoin. I believe that this will begin to happen over time. We’re already seeing other banks recognizing Bitcoin as potential collateral. We've seen U.S. housing agencies suggest that Bitcoin should be collateral for mortgages. As that starts to evolve, I believe the risk-adjusted capital and the Basel frameworks will evolve. I think S&P will also evolve in its view on Bitcoin. The maturity risk will reduce as we equitize our outstanding convertible debt that is senior to our preferreds. And finally, by demonstrating consistent access to capital markets and servicing our debt during Bitcoin bear markets, we will start seeing better ratings.
On the next slide, this is probably the most important point about getting a rating. Because we are now S&P rated, it gives us access to larger pools of capital than before. The unrated credit market is around $2.8 trillion worldwide, and now we have access to the high-yield rated market. B- is in the high-yield category, which is about three times the size of the existing market. Over time, the hope is if Bitcoin is treated as legitimate capital on our balance sheet, we would be considered an investment-grade rated company—which would provide access to a market that's 11 times bigger than what it is today. So, in summary, regarding the S&P rating, it’s a good starting point, and it’s important that we’re rated. An agency like S&P validates our company and starts to validate Bitcoin as an asset class; it’s a good starting point for us. The other part of S&P is their index business. They’ve now started to embrace crypto.
They have in successive quarters added Coinbase, Block, and Robinhood to the S&P index. We meet all the criteria required to be included in the S&P 500 Index. We are #131 by market cap among U.S. publicly traded companies. Unlike NASDAQ 100, S&P criteria considers other factors. So first, we must be a U.S. company, which we are, and listed, which we are, with a minimum market cap of $23 billion, which we have, and 250,000 shares traded each month for six months, which we meet. We also must have a last quarter with positive earnings. We've had two now, and some of the last four quarters must also have positive earnings, which we meet. The question we often get is why we are not yet included. We don’t know exactly why, since S&P does not publish reasons for inclusion or exclusion. We only became eligible last quarter; eligibility doesn’t necessarily mean immediate inclusion, which is typical.
Many successful companies like Tesla were not included in their first quarter after eligibility. We hope to access the index and its $13 trillion of capital that tracks the S&P 500 at some point. The other significant development over the last three months with the passage of the GENIUS Act, and with more clarity on regulations related to Bitcoin and other digital assets, big banks are further embracing crypto. Morgan Stanley has dropped their restrictions on wealth clients who can now own crypto funds, and they can solicit Bitcoin-backed securities, including Bitcoin-backed ETFs, advising 5% to 6% of clients’ portfolios to own Bitcoin. They also underwrote our most recent offering, Stretch, which gave us access to their wealth management channel. Citibank recently launched coverage as the first major bulge bracket bank to provide price targets and plans to launch crypto custody services next year, which is transformative as it allows major banks to custody Bitcoin and other digital assets.
Societe Generale has become the first major bank to launch dollar-pegged stablecoins, and banks like JPMorgan are now allowing Bitcoin and Ether as collateral. Citibank has also begun coverage and provided Bitcoin price targets, which is a significant improvement. The average price of Bitcoin among banks covering us is estimated to be $156,000 for 2025 and $180,000 by the end of 2026. You’ll also see strong price targets and ratings from all banks covering us. Let me now move to our 2025 guidance. I'll review the guidance provided last quarter and talk through additional notes for this quarter. First, I want to reaffirm the BTC guidance for 2025. This assumes a Bitcoin price of $150,000 at year-end, based on consensus targets noted earlier. We have a BTC yield target of 30% at year-end and a BTC dollar gain target of $20 billion, and activities are underway to achieve these through capital raises.
As for our earnings guidance, I also want to reaffirm our previous communication regarding an operating income target of $34 billion, a net income target of $24 billion, and an EPS target of $80 at year-end, again assuming a Bitcoin price of $150,000. For Stretch, which we launched three months ago, I want to reaffirm guidance on dividend rates. If the five-day VWAP of the price of Stretch is above $101, we would recommend a rate decrease or potentially a follow-on offering. If the five-day VWAP is between $95 and $99, we will recommend a 25 basis point rate increase to maintain the price of Stretch within our target range of $99 to $101. If the five-day VWAP is below $95 at the end of the month, we would recommend a 50 basis point rate increase. Let me show you what we have done since launching Stretch and provide updated guidance on our dividends for the next month. Upon launching the product in July, we started with a 9% dividend rate, increased it to 10% in August, then to 10.25% in September.
Today, we announce that effective November 1, we will increase the dividend rate by another 25 basis points to 10.5%, paid monthly. The last guidance aspect I want to address is something new to this group, which we call return of capital guidance. Mike will elaborate more on this, but this is a unique feature of all our preferred equity: the dividends paid are taxed as a return of capital. When taxed as a return of capital, it means that it’s deferred until you sell the underlying asset. So, if you hold the asset, you essentially pay zero taxes on it, compared to a qualified dividend taxed at rates between 20% and 35% based on your location or interest income taxed at 37% to 55%. We refer to these as ROC dividends. This unique feature arises due to our negative taxable earnings and profits, a result of being in this business and our intent to buy and hold Bitcoin, as opposed to engaging in activities that would yield significantly positive taxable earnings and profits.
Our guidance is that we expect this ROC treatment to continue for the foreseeable future, perhaps for 10 years or even longer. So, in summary, our preferred dividends are tax-free or tax-deferred, and we expect that to persist for the foreseeable future, which could be 10 years or more. With that, I will hand it over to our Executive Chairman, Michael Saylor.
Thank you, Phong, and thanks for joining us today. I'm really excited to talk to you about digital capital and digital credit. Let's go to the first slide. The first point I want to make is that Bitcoin has emerged as digital capital. What is digital capital? Digital gold—capital is a long-term store of value, and Bitcoin is a store of value. The U.S. government has embraced Bitcoin as a store of value, which means every major cabinet member endorses the notion that America will be the Bitcoin superpower, along with the President's point that you should never sell your Bitcoin. Let's go to the next slide. Wall Street has embraced Bitcoin as digital capital. Currently, there are 1.5 million Bitcoin held by spot ETFs, amounting to about $170 billion worth. The most successful ETF in Wall Street's history is IBIT. IBIT has grown explosively even in the past few months. The daily liquidity in IBIT is now approaching $4 billion or more per day, with over $50 billion in open interest in the derivatives market.
This is wildly successful. Next, numerous public companies have also embraced Bitcoin as digital capital. We were the first public holder of Bitcoin, then there were two, and within a year, the count rose to 60, and now over 200 publicly listed companies hold Bitcoin, amounting to more than 1 million Bitcoin valued at approximately $116 billion. These metrics show just the scale of the Bitcoin market. It has a $2.3 trillion market cap, $58 billion of daily liquidity, $76 billion in BTC open interest in the derivatives market, backed by 26 gigawatts of power—equivalent to 26 full nuclear reactors. The hash rate continues to rise, now at 1,100 exahash, with 30% of all registered voters in the U.S. being crypto holders. The crypto industry is valued at $3.9 trillion, with 700 million crypto users and 300 million Bitcoin holders. This is a global movement. Bitcoin is the capital asset at the center of the entire crypto industry and is traded on 1,000 exchanges.
Next, what do you do with digital gold? Well, just like gold, you issue credit on gold. For 300 years, the Western world operated on gold-backed credit; Bitcoin serves as digital gold. What we've recognized is that the killer application of digital capital is digital credit, and Strategy enables several security types based on that digital capital. You can see here that IBIT is digital capital in an ETF wrapper, displaying a 53% average return over the past five years, with 38% volatility. We’ve created four digital credit instruments that mitigate volatility and extract or distill performance from IBIT. Strike’s volatility is 28%, yielding an effective yield of 9%, while Stride’s volatility is 16% and provides a 13% effective yield. Strife has a volatility of 14%, with an extracted yield of 9%. The standout in our offering is Stretch, where we’ve converted that 38% volatility into 8% and extracted an effective yield of 10%.
As you can see, by dampening volatility, there’s essentially a conservation of energy or a conservation of volatility in the thermodynamic universe. Where does the volatility go? It gets passed on to the equities. The volatility stripped from BTC contributes to MSTR, enhancing its performance and opportunity. This has been very straightforward financial engineering. We are a structured finance company and are beginning with a blob of high-energy capital that’s long-duration, highly volatile, and high-performing. We are engineering out various durations, volatilities, risk profiles, and performance profiles. We are even transforming BTC currency into USD or other currencies. Next slide. This chart illustrates the economic landscape we operate in. Bitcoin has achieved a 53% performance over five years, nearly double the MAG 7. Gold has performed at 15% a year, just edging out S&P's 14%. The S&P serves as the conventional cost of capital, while real estate has significantly underperformed, showing growth of just 6% per year.
Money market instruments, short-duration U.S. treasuries, have delivered 3% annual performance, with mid to long-dated bonds at minus 3%. Strategies equity stands at plus 83%. All our financial engineering is founded on taking advantage of lower costs for equity and credit to acquire Bitcoin, benefiting equity holders. Next slide. Let’s take a look at our products: Strike, structured Bitcoin as a convertible preferred equity, provides some upside through equity at 33%. It has an 8% dividend at par, yielding an effective yield of 9.1%. Strike also pays ROC dividends, meaning they are tax-deferred as you step down your basis, leading to a tax equivalent adjusted yield of 21.6%. This is a misunderstood security offering compelling opportunities, acting as a perpetual duration call option on the stock with consistent dividends. If you invest, you receive a very long-term option with income attached.
In scenarios where Bitcoin declines by 80%, it protects your principal compared to losing 80% on Bitcoin itself. The effective yield for Strike competes against 1% to 4% options, emphasizing its uniqueness. Let’s proceed to the next slide. Stride, our second credit instrument, is long-duration, high-yield credit. It offers an effective yield of 12.5%, translating to a nearly tax-equivalent yield of 20%, and is over-collateralized by 4.8 times. Bitcoin could fall by 75%, and you'd still be covered. This instrument has a duration of eight years, offering a perpetual dividend, allowing you to harness this long-term opportunity. Comparatively, effective yields on high-yield corporate bonds stand at 6%, with tax implications; Stride offers double that, while tax-equivalent yield of Stride is three times higher. If you trust Bitcoin and the company, this is a compelling opportunity. Next comes Strife, STRF.
This is long-duration senior credit, cumulative with penalties if the company were ever to suspend dividends. It has a higher collateral coverage with a BTC rating of 7.5 times, providing an effective yield of 9.1%. When you look at this against comparable assets, Strife’s effective yield is twice that, while its tax-equivalent yield triples and comes with longer duration, which may introduce volatility based on future interest rate movements. If rates are predicted to decline, this is advantageous, but if rates are expected to rise, the opposite may apply. Next, we have Stretch, which is our highest degree of financial engineering. With Stretch, our goal was to reduce volatility, compress duration, convert BTC into a pure USD yield, and provide that to investors. Currently, Stretch offers an effective yield of 10.4%, with a tax-equivalent yield of 16%. It is under 6x over-collateralized and has the lowest volatility.
Our objective with Stretch is to attract investors searching for competitive offerings to traditional money markets at 10.4% tax-deferred. While it isn’t a bank account or even a money market, we're structuring it to compete against those sources. Next slide. Phong addressed the return of capital; what I’ll add is that ROC dividends have been around for quite some time, established tax law since 1910. Numerous companies have issued dividends that fall under this category, including oil pipelines, natural gas companies, and real estate companies. We’re in a compelling position, as our treasury model enables much clearer visibility of return of capital compared to being in other industries. The difference is the 0% upfront dividend tax rate versus the 20%-30% or 30%-55% rate on qualified dividends or interest income. ROC dividends emerge from having negative taxable earnings and profits, as our intent is to buy and hold Bitcoin.
We expect this ROC treatment to continue for the foreseeable future for at least 10 years and possibly longer. Let’s move to the next slide. Consider the value of the Bitcoin treasury model. It creates a flywheel— a scalable, tax-efficient fixed income generator. We issue digital equity and digital credit that is tax-deferred. We pay dividends on that credit, which are also tax-deferred. We allocate this capital to buy Bitcoin, held indefinitely—so all parts of the equation are tax-deferred. This generates numerous compelling investment opportunities unseen in capital markets before. Let’s go on to the next slide. Digital credit opportunities—how can this be broken down? Next slide. Here you see Stretch compared to other credit instruments in the U.S. On average, Stretch provides a 16.5% tax equivalent yield, more than double any returns from traditional credit markets. Stretch’s offerings clearly outshine traditional options with an effective yield of 14.4%, reinforcing our position as the superior choice. This is about changing perspectives toward credit, and we are on a mission to redefine what investors expect from their credit instruments.
Thank you, Michael. We are now going to proceed to the interactive live Q&A session of our webinar. I would like to invite all of our Q&A guests to come on video. We look forward to hearing your questions, and we'll take them one at a time. I'll call your names, and you can direct your questions to the management team. For the first question, I would like to invite Andrew Harte, a research analyst from BTIG. Andrew?
Questions and answers
Team, thanks for having me on. I appreciate all the details in the presentation as always. A lot of our investor questions are focused on the company's ability to pay dividends, especially as the preferred equity strategy continues to grow. Can you shed some additional color on plans to fund those dividends? If there was a period when the mNAV compressed or fell below 1x, how could that plan potentially change?
Yes, I can cover this one. Andrew talked about this a little bit earlier. Right now, our dividends and interest on our convertible notes total $689 million annually. Our primary strategy, when our mNAV is above 1x, is to fund that through ATM issuances. Just to remind everybody, in the last 12 months, we've issued about $27 billion of equity, which means that $689 million is about 2.6% of our total equity raised. So we have clearly the ability to generate equity to cover our dividend and interest payments. The big question is what happens when it becomes dilutive to shareholders to issue equity, or if we go below 1x NAV, what would we do? There are other solutions we have discussed. We could sell equity derivatives, Bitcoin derivatives, and we could sell high basis Bitcoin to cover our dividend needs for our preferreds. It’s important when we do these things to preserve the ROC dividends; thus, we would avoid positive tax E&P. For example, we would not do things like sell equity or Bitcoin derivatives that would push our E&P over zero.
We can sell high basis Bitcoin, potentially at a loss, which would cause negative E&P and offset that with other Bitcoin causing positive E&P. We would not sell the software business, for instance, because that would create income and positive E&P. We still aim to preserve our ROC dividends, which provide preferable tax-deferred treatment for our preferreds. These are some of the actions we would take in that scenario. However, we don't anticipate facing that scenario, but we have plans in place.
Thank you. For the next question, I'd like to invite Pierre Rochard.
Thank you for organizing this, and thank you for the invitation. It was mentioned that there would be marketing and advertising around the preferreds. What do you anticipate that expense looking like? And what would the return on investment be for those efforts?
I can cover that. We're just starting to get into this. You just saw one of our advertisements for those who like money: Stretch, right? We’ll start to experiment with paid advertising on platforms like X or YouTube. Whatever the expense is, I believe it will be minimal compared to the increased inflows we hope to drive to our preferreds. We’ve gone through in the past; if we can raise an incremental $1 billion in a preferred, we will immediately buy Bitcoin, and that’s accretive to our Bitcoin yield and Bitcoin per share. I don’t expect we will spend a ton of money upfront; we will experiment and identify the right channels that will engage people and make them aware of our Bitcoin credit machine. In addition, we are out meeting with investors quite a bit now. Our team—Mike, myself, Andrew, Shirish, CJ and others—are doing just that.
Yes. I would just add that I spent a lot of time in Schwab studios recording content for the Schwab network. I was in Vegas for Money 20/20, and in Austin at a credit conference, with a road show coming up in the Middle East. There’s significant outreach happening. We are invited to speak at numerous conferences and television programs. Some of the better marketing channels involve going on Bloomberg, Fox, or CNBC. The difference now from a year ago is that people understand what Bitcoin is; it's seen as digital gold. Now, when we appear on Bloomberg or Fox or CNBC, we promote Stretch with its 10.5% tax-deferred dividends. People are more open to learning about our products. Previously, it would take hours and hours for someone to understand Bitcoin. Now if you say you have a bank account that pays 10% tax-deferred, people recognize its value. We’ll explore every marketing channel available to us to spread the word. Our outreach efforts have dramatically increased inquiries and interest in our products.
Thank you, Pierre. For the next question, I'd like to invite Mark Palmer, our research analyst from Benchmark.
We've already seen the beginnings of consolidation within the digital asset treasury space. Is there a circumstance under which Strategy would step into the market as an acquirer of a Bitcoin treasury company that was trading at a materially lower mNAV in a transaction that would be, by definition, accretive, accelerating its acquisition of Bitcoins?
I'll give my opinion, and then Phong can chime in. We have done 84 acquisitions of Bitcoin, each homogeneous, transparent, with an instant calculation to determine if they’re accretive or dilutive, making them generally accretive. Our focus lies in conducting high-speed transparent digital transactions and selling digital credit while acquiring Bitcoin. We currently have no plans for future M&A activity, even if it appears potentially accretive. There’s considerable uncertainty involved, and it often takes six to nine months, which can be distracting for management. We are laser-focused on selling our four credit instruments and enhancing the reach of our digital credit instruments globally, while also improving our balance sheet quality by equitizing convertible bonds. These are our interests. We wouldn’t entirely close the door on M&A, but our strategy now is centered on selling digital credit and communicating our objectives to credit and equity investors.
No, I don’t have anything to add. I generally agree with what Michael stated. We’ve been a software company for nearly 30 years, and M&A in software tech can be complicated. The same holds true for acquiring Bitcoin treasury companies.
Okay. Just one more question regarding your intention to tap into international markets from a capital raising perspective. Are you planning to market the same four perpetual preferred instruments currently available but tailored to different markets worldwide, or will you design new instruments specific to those regions?
It will be the latter. We will design instruments for Canada, denominated in Canadian CAD, and offer them on Canadian exchanges. Each product will be localized because if you’re an investor in that region, you don't want currency risk involved. If we enter Europe, we’d create a euro-denominated instrument. While our U.S. dollar instruments can be purchased by European investors, we believe creating products tailored to specific markets will unlock participation opportunities.
Thank you, Mark. For the next question, I'd like to invite Natalie Brunell.
Beyond Bitcoin price action, can you identify two or three specific challenges that are currently serving as headwinds for the growth and performance of Strategy and the Bitcoin treasury industry? What actions can be taken to overcome these challenges?
I think Phong highlighted some challenges concerning S&P credit rating issues. Bitcoin is not regarded as a capital asset according to traditional credit rating standards. This presents a structural hurdle we face. Similarly, observations of negative accounting treatment have previously undermined our financials. The second headwind pertains to banking acceptance, custody issues, and credit institutions issuing credit based on Bitcoin. Positive developments are anticipated; we've heard significant U.S. banks will begin engaging actively with Bitcoin in early 2026. That would be a boon for Bitcoin adoption. While these changes are not driven by government intervention, they require lobbying and educating relevant entities—banks, insurance firms, and investors—about the benefits of Bitcoin as a store of value. Attracting traditional fixed income investors and corporate treasurers to recognize better alternatives is vital. It's a focus for us over the next few years.
Thanks, Natalie. Next, I invite Brian Dobson, a research analyst from Clear Street.
You received a credit rating; I agree it's a significant first step for opening doors at pension funds and insurance companies. I know it's early days, but are you already having conversations with those investors? If yes, what’s the feedback? As a second part of that question, would you have the preferreds and converts rated separately? Many investors will probably infer instrument ratings from the general company rating; what are your thoughts?
Before obtaining the rating, we had conversations with large institutions—insurance companies and pension funds—indicating they could not invest in unrated instruments without significant capital penalties and expressed interest in our structure. That’s primarily why we pursued a major rating agency for this rating. This should open doors for different categories of investors, although I anticipate it won’t lead to an avalanche immediate response. As we market and engage with stakeholders like Mike and Andrew, I believe we’ll see a gradual change in perception in how they view this opportunity.
I wanted to follow up regarding selling into Asia and Europe. Both regions present unique regulatory challenges. How developed are your efforts in those regions?
We are quite far along. You’re correct; there are hurdles, which is why we must create region-specific products. Understanding regulatory frameworks, tax structures, and market specifics is essential, and we are actively engaged in this process. Our achievements with preferred products, despite past market challenges, demonstrate our potential to corner this market. We see the regulatory framework as a challenge but also an opportunity to differentiate ourselves by offering superior products relative to what is currently available.
Thanks, Brian. For the next question, I would like to invite Adam Livingston.
Congrats on the great quarter and the credit rating. The Japanese Bitcoin treasury company, Metaplanet, recently announced a share buyback program intending to deploy buybacks strategically, boosting Bitcoin per share for equity holders. Would Strategy ever consider adopting a similar program to increase Bitcoin exposure for shareholders if MSTR ever trades below a 1x mNAV?
Phong, do you want to start?
Yes, I’ll start on that. I don’t think there’s anything we wouldn’t do that would create incremental Bitcoin yield that enhances Bitcoin per share for holders while preserving our ROC dividends for our preferred holders. We already have an open buyback authorization from years back. The last buyback was in 2018 or so. While this is not our primary strategy, it’s an option we would consider if the right circumstances arise. Mike, do you have anything to add?
Yes. I am open-minded toward a variety of options, although our current preference is to grow the capital base.
Thanks, Adam. We have two more questions to go. For the next one, I will invite Lance Vitanza, our research analyst from TD Cowen.
The 30% BTC yield target for 2025 is surprising to see maintained, especially with the recent deceleration in Bitcoin accumulation. Achieving 30% would seemingly require raising a couple of billion dollars, and with only two months left in the year, you can't rely solely on ATM issuances to reach that. Are you currently contemplating a significant underwritten transaction potentially in overseas markets? Is that how you aim to reach the 30% target?
Yes. We need to raise roughly $2 billion in a non-dilutive fashion to meet our capital goals. You've seen us do that at a quick pace in the past. With two months and 60 days before the holidays to go, we’re actively exploring options and will see what we can accomplish.
Great. For the last question, I invite Ben Werkman from Strive.
Over the last 12 months, Strategy has succeeded at building the capital base and expanding the balance sheet using equity via IPOs from preferred markets. During that same period, MSTR has underperformed Bitcoin. Do you view your strategic priorities moving forward as focusing more on increasing amplification rather than solely expanding the balance sheet? How has the past year influenced your strategy going forward in terms of prioritizing preferreds over common equity?
That’s an open-ended question, so I will start, and then Phong or Andrew may have something to add. When it comes to equity, if you plan on holding Bitcoin for a four-year or longer horizon, you cannot have a short time frame when it comes to holding amplified Bitcoin or equities, which inherently involves more volatility. A longer time horizon is necessary. We aim to manage the company to create substantial shareholder value over the next decade. Although we pursue an idea that we should ideally see returns within four years, we don’t equate payoff to short-term horizons. There is only one circumstance where we actively seek short-term payoffs, and that’s with STRC. Investments within four months should ideally be placed there as they strip volatility, and duration aligns with the shorter horizon. The credit instruments are effective; if we maximize capital, we can do so but without negatively influencing our share positions or risking credit quality. We've actively chosen to maximize capital while maintaining balance sheet strength, setting a disciplined growth agenda focused on strategic dividends and operational consistency.
Excellent. This concludes the Q&A portion of the webinar. I would like to thank all of our analysts for their questions and all the attendees for tuning in live. We had over 25,000 people across YouTube, X live stream, and the Zoom webinar. Thank you all for joining us, and I will now turn the call over to Phong for the closing remarks.
I also want to thank the analysts for joining us and being on video while asking questions. I want to thank everyone who watched our earnings call, all of our supporters, and our shareholders. Join us in Las Vegas from February 23 to 26 at the Wynn Resort. For everyone else, have a great holiday season, and we’ll see you in three months during our next earnings call. Thank you.